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Some Advantages Of A Debt Management Plan

One of the key benefits of a DMP is that it is flexible. If your circumstances change in the future the plan can usually be adapted to fit in with this change. You are also not bound by a debt management plan. You can choose to stop contributing to a plan at any point.

If you get an organisation to manage your debt management plan you will benefit from the involvement of an intermediary. While it remains important for you to be aware of your creditors reaction to your repayment offer, you will have an intermediary to handle the communication and negotiation for you.

A budget should be created that ensures you have enough money to pay your household bills and expenses. You should be able to live reasonably, avoid the need to take on further debts, and contribute regularly towards repaying your debts.

Creditors often agree to suspend or reduce interest (and other charges) when they agree to a debt management plan. Where this happens more of your money will be going towards reducing your debt balance.

Entering debt management may help you to avoid a more formal and serious personal insolvency.

Some Disadvantages Of A Debt Management Plan  

Like other debt solutions, your credit rating is likely to be affected. You can read more about this subject here.  

Your creditors are not compelled to accept the repayment offers made in your DMP. They do not have to suspend interest and other charges. They are not prevented from using legal debt recovery procedures if they choose to.

Making reduced payments towards your debts is likely to result in an extended repayment period and could lead to an increase in the total amount to be repaid (especially where creditors do not agree to cease charging interest).

Paying an “initial fee” to set-up a debt management plan, or ceasing to pay your creditors directly, is likely to result in your accounts going into arrears or further into arrears.

Depending upon your personal circumstances, it could take longer to clear your unsecured debts using a DMP in comparison to personal insolvency procedures.

Beverley Budsworth Phil Corfield Debt Management Plan Expert DMP Adviser
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